FCA Swings to Loss, Penalties Plunge 79%

UK regulator reports £8.6 million loss, penalties drop to £181 million from £879.5 million.

The UK’s Financial Conduct Authority (FCA) reported a loss of £8.6 million ($11.1 million) in its 2016-2017 annual report, compared to profits of £3.8 million for the previous year.

It also reported £181 million in penalties collected, a drop of more than 79% from the £879.5 million collected last year, and £163 million of that was in one penalty levied against Deutsche Bank in January over alleged money laundering in Russia. Meanwhile, net actuarial losses for the year surged to £65.3 million from the £6.5 million reported during the previous year.

“Measuring our regulatory effectiveness is not straightforward,” said John Griffith-Jones, chairman of the FCA in a statement. “While we set out our inputs and our outputs, the all-important outcome of harm prevented or improvements achieved through deterrence cannot be readily quantified on an annual basis.”

In the report, the FCA highlighted its role in helping the UK government’s transition as it negotiates its separation from the European Union.

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“The UK’s decision to leave the EU will have important implications for the financial services sector, the regulatory framework, and hence our work,” said the FCA, which is providing technical advice to the government to support the EU withdrawal negotiations “We are working with firms to understand their plans to continue to service their cross-border operations. We have begun work with the Treasury to provide technical input to work involving the Great Repeal Bill.”

The FCA said this is a “significant task” that involves a line-by-line analysis of each piece of EU legislation for which the FCA is the lead regulator. “Our fundamental objective in this work is to give all interested parties certainty,” said the report, “so that there is a clear and functioning regulatory regime on the day that the UK ceases to be a member of the EU.”

The FCA also reported that its Financial Ombudsman Service received 1,394,379 enquiries for 2016-17, down from 1,631,955 in 2015-16, and 1,786,973 in 2014-15. For 2016-17, the Financial Ombudsman Service resolved 336,381 cases, with an overall uphold rate of a complaint of 43%, compared to 438,802 cases and 51% uphold rate for 2015-16.

“While complaint numbers have decreased, we recognize that complaints data are just one indicator of how financial markets are working,” said the FCA. “Other factors can positively or negatively affect complaint numbers, such as growing consumer awareness of their rights.”

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Chase’s Dimon Concerned EU can “Dictate” Job Locations in Wake of Brexit

CEO says Brussels may wield too much influence, and also warns Fed may unwind QE too fast.

JP Morgan Chase CEO Jamie Dimon warned that following Brexit, the European Union (EU) can “dictate” whether jobs can stay or be moved out of London during a speech at the July 12 Paris Europlace International Financial Forum.

In his speech, he also said that JP Morgan is proposing to move several hundred employees to Europe as Brexit talks intensify. In addition, the US bank’s London employees may be uprooted. The figure was originally estimated at one-quarter of the London staff, but Dimon is now unsure, as Brussels will have the final say.

“We have 16,000 people in the UK, but 75% of that is servicing EU companies, and if regulators say one day, ‘we’re not comfortable with your risk people, your lawyers, your compliance being in the UK,’ they can make us move it,” Dimon told Sky News. “We will simply be subject to what they do down the road. What happens next is totally up to the EU, it’s not up to Britain.”

As the UK’s departure continues, financial institutions such as Citibank have been confirming early plans to shift work into other EU cities, such as Paris and Frankfurt in order to maintain their links. There are currently 23 major firms with contingency plans in place, according to EY Financial services. According to Business Insider, Japanese bank Nomura is applying for a license to operate its EU base in Frankfurt post-Brexit.

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Dimon said that in the Brexit aftermath, most of JP Morgan’s EU activities can be handled through its operations in Frankfurt, Luxembourg, and Dublin—where the bank is buying a landmark office block that could double its current staff in Ireland’s capital.

He also expressed concerns over the decision by the Federal Reserve and other major central banks to unwind their multi-trillion-dollar bond-buying programs, which Federal Reserve chairwoman Janet Yellen reiterated Wednesday, when she testified before a house panel. She is expected to again reiterate the decision today before the Senate Banking Committee.

“We’ve never had QE like this before, we’ve never had unwinding like this before. Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before,” he said.

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